As NCAA college basketball fans celebrate “March Madness”, another lesser-known form of madness is transpiring in Texas with the acquisition of the electric utility TXU.

While the March Madness on the basketball court may leave fans disappointed, the TXU madness engineered by the environmental lobby will hurt investors and consumers on a broader scale.

The acquisition of TXU by corporate raiders Kohlberg Kravis Roberts & Company (KKR) and the Texas Pacific Group (TPG) is certainly noteworthy because of its record-setting price tag of $45 billion, but it will probably forever earn its place in history because the deal was designed to placate special interest groups, a.k.a. the “energy pimps.”

These energy pimps established a de facto veto power over this private transaction by establishing themselves as the enforcer of energy policy in Texas. By exploiting the corporate social responsibility (CSR) policies of lending institutions in TXU’s initial energy plan, they became the power broker that had to be paid-off.

It’s a classic example of how CSR policies, voluntary standards that go beyond the legal requirements of business, are increasingly being used to cut their own throats.

Last April, TXU announced plans to invest $10 billion in new electric power facilities to meet the growing demands of the Texas economy. “Texans want ample generation supply, access to lower electric prices and better air quality, and TXU will deliver all three,” said TXU CEO C. John Wilder in a company press release. The release further stated, “The future growth of the now vibrant economy could be dampened by volatile and rising energy commodity prices… There is no quick fix… There is no easy solution to reduce U.S. dependence on foreign energy sources and to reduce power prices.”

Then the announcement of KKR and TPG’s planned acquisition occurred. On March 1, TXU announced a reversal of its plans to build eight new coal-fired power plants, stating, “This is an important step in fulfilling TXU’s commitment, made in connection with the recently announced merger, to immediately seek to suspend the permit application process for the eight units announced last year.”

This sudden reversal raises a number of questions. Notably, who determined additional energy sources to meet growing demand were no longer needed, and who determined dependency on rising natural gas commodity prices was suddenly good for consumers?

The answer is the energy pimps. In this case, it is the Rainforest Action Network (RAN), Environmental Defense and the Natural Resources Defense Council. They opposed TXU’s energy-production plan because it was based on coal — a cheap source of energy but a source of carbon dioxide emissions.

With coordination that would make an NCAA coach proud, these groups sought to block the coal power plants from the opening tip-off. RAN led the way by tackling Wall Street’s financing for construction of the power plants. How? By reminding lenders of their CSR commitments.

Citigroup, Merrill Lynch and Morgan Stanley — the lead banks arranging TXU’s loans — were targeted. “We want banks to shift their investments away from dirty and dangerous technologies and towards funding the future,” said a RAN spokesperson.

This left the banks caught in a crossfire between their CSR policies and their business goals. CSR policies at many banks commit them to work to reduce their greenhouse gas emissions, and some go further by subjecting loans to potential clients on conditions of emissions reductions.

In the TXU case, pressure tactics included letters to bank CEOs and protests outside company offices nationwide. These groups also whipped up local resistance, claiming health concerns related to coal emissions.

Citigroup’s CEO Chuck Prince, RAN’s favorite whipping boy, was an inviting target. According to the Wall Street Journal, RAN’s executive director “put Mr. Prince on notice that his organization plans to begin agitating against the company if the TXU project goes forward with the banks involvement.”

KKR and TPG, seeing TXU in trouble and looking for a fast-break buy-out, began negotiating with the energy pimps in secret. According to the New York Times , the raiders bluntly asked them “what would it take” to get their support. To buy peace, they agreed to stop construction of the eight coal power plants and committed TXU to supporting federal regulations on carbon dioxide emissions.

Empowered by having successfully influenced a major Wall Street deal, the energy pimps will undoubtedly continue their hustle. For shareholders, the costs are beginning to add up. According to its recent report to the Securities and Exchange Commission, TXU expects a loss of $ 1.1 billion due to the plant cancellations. In addition, bank shareholders lost revenue from the proposed financing of the now-cancelled energy plants.

The biggest loser, however, will be consumers who will pay higher utility bills because access to cheap energy supplies was denied. This victory also puts a target on the proposed construction of approximately 150 coal plants nationwide.

But there’s still time on the clock. The TXU buy-out must still gain the approval of the Texas legislature. These elected officials need to assert their authority and recognize the danger of allowing utility prices and economic growth to be hustled by special interests.

For the sake of consumers and the free market, the Texas legislature must stand tall and throw both the TXU deal and the energy pimps out of the game.